Sep 9, 2012

Raising Petrol Prices-Government Can Control?

Before talking about, regulation of fuel prices, and other aspects, it is important to know the reason as to why fuel prices go up. The main reasons, the cost of crude oil and the cost of refined petrol and diesel on the world market. Crude oil makes up a significant portion of the cost of fuel. Crude oil is traded in US$ as a commodity on the international market. The market is influenced by a number of factors including global demand, supply, political events and manufacturing capability.

Refineries purchase crude oil on the international market to make it into petrol and diesel. Refined product is also traded on the international market and has its own pricing. As with crude oil the market moves according to global supply and demand. When the price of refined fuel rises, need to pay more, and when it drops, we pay less. In brief, a combination of the cost of crude oil and refined products are a significant factor, in determining, the price we pay for fuel.

The next most influential factor on the price at the pump is the exchange rate, as oil and refined products are sold in US Dollars. International shipping also has an effect on the price. Competition, in a particular market and transport costs are also the other main factors that cause prices to sometimes vary from place to place.

So, all these factors have a very major role to play, in determining the fuel prices, and if Government has any control, it will be only in the subsidy that it is giving. We cannot create crude oil wells, or petrol wells, but there are definitely things we can do on our part. We can definitely use the resources we have carefully, and can take measures to educate people and to create awareness, in the public to use fuel carefully, to the needed extent. And we can start investing on research and development for solutions on alternatives on fuel usage, for the future needs.